Concept explainers
A $1,000 bond has a coupon of 5 percent and matures after twelve years. Assume that the bond pays interest annually.
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What would be the
bond's price if comparable debt yields 8 percent? Use Appendix B and Appendix D to answer the question. Round your answer to the nearest dollar.$ ____________
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What would be the price if comparable debt yields 8 percent and the bond matures after six years? Use Appendix B and Appendix D to answer the question. Round your answer to the nearest dollar.
$ _________---
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What are the current yields and the yields to maturity in a and b? Round your answers to two decimal places.
The bond matures after twelve years:
CY: ______%
YTM: _________ %The bond matures after six years:
CY: _____ %
YTM: _____ %
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- The current zero-coupon yield curve for risk-free bonds is as follows: What is the risk-free interest rate for a five-year maturity? The risk-free interest rate for a five-year maturity is _____%. (Round to two decimal places.)arrow_forwardA 9-year bond has a yield of 13.5% and a duration of 8.63 years. If the MARKET yield changes by 60 basis points, what is the percentage change in the bond’s price? Is this an increase or decrease? A 9-year bond has a yield of 13.5% and a duration of 8.63 years. If the BOND'S yield changes by 60 basis points, what is the percentage change in the bond’s price? Is this an increase or decrease? ( Explain well both question with proper step by step Answer) .arrow_forwardFind the duration of a bond with a settlement date of May 27, 2025, and maturity date November 15, 2036. The coupon rate of the bond is 6.0%, and the bond pays coupons semiannually. The bond is selling at a bond-equivalent yield to maturity of 8.0%. Use Spreadsheet 16.3. Note: Do not round intermediate calculations. Round your answers to 2 decimal places. X Answer is complete but not entirely correct. Macaulay duration Modified duration 11.98 X 11.52 Xarrow_forward
- A $1,000 bond has a 6.5 percent coupon and matures after ten years. If current interest rates are 8 percent, what should be the price of the bond? Assume that the bond pays interest annually. Use Appendix B and Appendix D to answer the question. Round your answer to the nearest dollar. $ If after six years interest rates are still 8 percent, what should be the price of the bond? Use Appendix B and Appendix D to answer the question. Assume that the bond pays interest annually. Round your answer to the nearest dollar. $ Change the interest rate in a and b to 6 percent and rework your answers. Assume that the bond pays interest annually. Round your answers to the nearest dollar. Price of the bond (ten years to maturity): $ Price of the bond (four years to maturity): $arrow_forwardConsider a bond with semiannual interest payments that has a Settlement Date of 8/15/2020, a Maturity Date of 2/15/2031, a Coupon Rate of 5.00%, a Market Price of $975, a Face Value of $1,000, and a Required Return of 5.35%. What is the Macaulay Duration using the Duration function on these bonds expressed as a decimal calculated to two decimal places if you purchase them at the current market price? For example, if your answer is 12.345 then enter as 12.35 in the answerarrow_forwardSuppose that the prices of zero-coupon bonds with various maturities are given in the following table. The face value of each bond is $1,000. Maturity (Years) 1 2 3 4 5 Price $983.78 865.89 797.92 732.00 660.24 Required: a. Calculate the forward rate of interest for each year. b. How could you construct a 1-year forward loan beginning in year 3? c. How could you construct a 1-year forward loan beginning in year 4?arrow_forward
- A General Power bond carries a coupon rate of 9.2%, has 9 years until maturity, and sells at a yield to maturity of 8.2%. (Assume annual interest payments.) a. What interest payments do bondholders receive each year? b. At what price does the bond sell? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. c. What will happen to the bond price if the yield to maturity falls to 7.2%? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. A a. Interest payments b. Price c. Price will byarrow_forwardA bond that matures in 8 years has a par value of $1,000 and an annual coupon payment of $70; its market interest rate is 9%. What is its price? A bond that matures in 12 years has a par value of $1,000 and an annual coupon rate of 10%; the market interest rate is 8%. What is its price? Which of those two bonds is a discount bond, and which is a premium bond? Explain.arrow_forwardGive typing answer with explanation and conclusion A 3-month zero-coupon bond is selling for $99.7 and a 10-year zero-coupon bond is selling for $55.7. Both bonds have a face value of $100. What's the 10-year - 3-month spread in their yields? Answer in percent, rounded to one decimal place.arrow_forward
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